UK: What’s next for disputes emerging from the COVID-19 crisis and the role of mediation

For anyone trying to predict and manage litigation risk at this time, a look back to previous global crises, like the 2008 financial crash, may help them understand and prepare for what’s next. With similar, or even greater, levels of disputes anticipated, former senior judges in the UK have called for ‘new thinking’ to deal with the expected wave of cases.

The group, which includes two former heads of the UK Supreme Court, will look at how the legal system can respond to give international commerce (and the legal system itself) some ‘breathing space’ from what they describe as an oncoming ‘deluge of litigation and arbitration.’

We look here at what features may distinguish the COVID-19 disputes landscape in the UK from previous crises and the role this ‘Breathing Space’ project, as they have coined it, may have in shaping the future.

How might this time be different?

First, the third-party litigation funding industry has matured since 2008. The increased availability of funding will provide much-needed ammunition to cash-strapped companies to advance disputes. This may act as a counter-balance to moves encouraging early conciliation. However, faced with the novel situation of COVID-19 and defendants who may be unable to pay out successful claims, funders may find it difficult to forecast risk.

Second, the landscape of consumer and collective redress has evolved considerably in the past 10 years, setting the scene for more European-style 'class actions' than ever before. In the UK, for example, opt-out collective actions were introduced under the Consumer Rights Act 2015 and are now being heavily used. All eyes are on the Merricks v. Mastercard appeal. But regardless of the outcome, the door remains open for future UK class action-style claims, and claimant law firms are monitoring the current crisis closely for future opportunities.

Third, potential disputes will arise in a similar or even broader range of categories than in previous crises – with securities, employment, M&A, financing, commercial contract, consumer, insurance, insolvency and fraud-related disputes likely.

Calls for ‘breathing space’ – will this lead to long-lasting change?

Against this background, the British Institute of International and Comparative Law (BIICL) has recognised that the international dispute resolution system – whether that is via courts or arbitration – is likely to come under considerable strain in the coming months and years. The ‘Breathing Space’ project is their response. With the help of senior former judges, they are calling for new measures to resolve disputes and have suggested conciliation should be further encouraged. 

The project is still in its early stages and any outcomes may be most relevant for disputes involving small to medium sized enterprises. But this willingness by prominent former UK judges to encourage parties and their lawyers to show creativity in exploring alternative forms of dispute resolution sends a strong message, and their judicial colleagues still on the bench will, no doubt, be listening with interest.

With the English courts quickly moving to remote hearings and many international arbitral institutions doing the same, the COVID-19 pandemic is already changing how disputes are litigated in England. Similarly, many mediations have also gone online. But time will tell if the crisis, and related creative thinking like the Breathing Space project, produces a more long-lasting and disruptive effect on the way disputes are resolved.

Certainly, there is a need to explore this as a matter of priority to, as the BIICL press release (PDF) notes, encourage ‘a legal environment which is conducive to optimism and a global recovery.’

To put all of this in perspective, Freshfields has asked its attorneys, and its clients, the simple question: in terms of disputes, what comes next? Our report – which can be downloaded here (PDF) – summarises the key disputes trends we’re seeing around the world.

See here for related posts in this series.